Wage Net Discount Rates: 1981–2012

David Schap, Robert Baumann () and Lauren Guest
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Lauren Guest: Department of Economics and Accounting, College of the Holy Cross

No 1416, Working Papers from College of the Holy Cross, Department of Economics

Abstract: The study explores time series properties of three wage net discount rate series derived using interest rates based on (alternatively) 1-year, 6-month and 3-month Treasury securities coupled with wage growth rates, initially for the period from 1981:01 to 2012:06, then subsequently through 2012:12. Stationarity tests are run on the full series and various sub-series to identify any portion of the series on which reliable forecasting can be based. Initially no support is found for the total offset hypothesis based on the full-time series (but support is subsequently found for total offset when exploring various data sub-series). Positive findings include that the three trended wage net growth rate series for the entire period under study are stationary, implying that reliable short-term forecasting of wage net discount rates is possible based on each of the trended series. Short-run forecasts based on the trended series are presented for 2012:07–2012:12 and compared to actual data in the period. Finally, the three trended wage net discount rate series are re-examined for 1981:01–2012:12, with short-term forecasting equations presented. Various sub-series of WNDRs are then explored in hopes of finding one or more that may be stationary about a constant term. Additional testing identifies three sub-series all ending 2012:12 with varying start dates that have desirable stationarity properties. The sub-series starting 2007:11 is highly stationary, but peculiar, with an associated constant WNDR that is negative and statistically different from zero; and the two sub-series beginning 1990:12 and 1994:05 have stationary attributes, yet possess constant terms that are slightly positive but not statistically different from zero, thus providing modest support for the total offset method.

Keywords: Forensic; economics (search for similar items in EconPapers)
JEL-codes: K13 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2014-12
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Published in Journal of Forensic Economics, Volume 25, Number 2, December 2014, Pages 153-174

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Journal Article: Wage Net Discount Rates: 1981–2012 (2014)
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